If you sit back and think about it, the concept of modern tech investing seems ludicrous. Investors pour vast sums of money into ideas they believe will become the “next big thing” and only stand to gain in the event of an exit.

When most of us think about business exits, our minds instantly go to one of two scenarios: acquisition or IPO.

Of course, only a fraction of entrepreneurial ventures ever get acquired, and even fewer ever decide to go public. How then, are investors ever supposed to see a return on their capital?

The truth is that most don’t. Most entrepreneurial ventures, especially those in the tech world, sit by hoping to be acquired until they eventually (and inevitably) run out of cash

Sure, there are a few that focus on generating cash flow (such as Basecamp and Infusionsoft), but they’re in the minority. Most have the philosophy of “go big or die trying.”

I think this belief is ridiculous and limits both investors and the entrepreneurs they back.

In reality, there’s more than one way to exit a business, and entrepreneurs would be wise keep this fact in mind.

The tragedy of the “all or nothing approach”

Over the past eight years at BodeTree, my co-founder and I have fielded more discovery calls with potential acquirers than I can remember. Nearly all of our prospective suitors were interested in one aspect or another of the business, but rarely the entire entity.

At the time, however, we found ourselves in a position where we could only accept an “all or nothing” offer. We felt that an all-out acquisition was the only way to provide an attractive return for investors, and we weren’t exactly wrong.

I remember the first serious offer we ever had. We were four or five years into BodeTree at the time and were approached by a publicly-traded bank technology company from the East Coast.

They loved what we had built, but were only really interested in the technology and offered a price that was far below the valuation established in our most recent investment round.

We stuck to our guns and pushed for a valuation that would provide a positive return for our investors, and ultimately looked a little foolish for doing so. Suffice to say; the deal died rather quickly after that.

When faced with adversity, get creative

My partner and I realized that we had boxed ourselves in by our business model and valuation. While our technology was valuable, we did not yet have the cash flow necessary to justify our desired sales price.

Now, in frothy markets, this isn’t an issue. Companies will pay a tremendous premium for strategic purposes when pursuing a hot market. The banking sector, however, proved to be far different.

Not only was it more conservative, but it also had little interest in the broad application of our technology. Instead, most acquirers wanted to incorporate it in-house to bolster their tech credentials.

This led to a significant revelation. We needed to change our approach so we could open up new ways to maximize the value of our assets.

How we did it

First, we had to take our product and carve out distinct offerings based on sales channel. The technology needed to be unique enough to serve a particular segment of the market, while still retaining the necessary flexibility to suit our diverse needs.

We did this by focusing on two verticals: franchising and banking. This move enabled us to begin to isolate the value of each respective channel and package it for a potential sale.

Next, we expanded our business so that we had the cash flow necessary to support the company independently, thus lessening our dependence on any one given product. We did this by acquiring VelocityFD, a services-based franchise development company that complemented our strategy and provided an independent revenue stream.

At this point, we were in a position to do two things: First, we could sell our banking channel as-is at a valuation that made sense for more buyers. Second, we managed to retain the franchising segment of the business, which was profitable.

This allowed us to offer our investors an outsized and, far more confident, return. There was the one-time bump that resulted from the sale, but also the cash flows from the remaining business.

Don't be afraid to break the rules

As entrepreneurs, we find ourselves often adhering to an unspoken set of rules about how things are done. The truth is that there are no rules for exiting a business. We are limited only by our creativity.

The partial sale that BodeTree pursued made excellent sense for our team and our investors. It enabled us to sell off an asset and line of business for a price that made sense in the market while refocusing the existing company toward a new and more profitable segment.

More entrepreneurs should abandon the pursuit of the all or nothing sale and instead find creative ways to realize value for shareholders.

Chris Myers is the Cofounder and CEO of BodeTree and a Partner at BT Ventures. His latest book, The Enlightened Franchisee, is now available on Amazon.